Sustainable Production and Consumption

Sustainable Consumption Series

Contents

Introduction
Advertising and Consumption
The Bane of Over-consumption
Advertising Industry and Consumption
What Can be Done?
Recommendations

Introduction  

Producers produce goods and services for consumption. Advertising enables the information on these goods and services to reach consumers. This would then translate into buying decisions if the consumer can afford or need it. However, often the need is created by enticing the consumer to purchase and consume. Over the last one and half decades we have been getting conscious that the present consumption trends may not be sustainable in the long run. As advertising influences consumption it can be one important area of intervention to correct the worldwide unsustainable consumption trends.

For developing countries like India the problem is twofold as there is both over-consumption and under-consumption. Advertising and marketing not only makes people consume more but is also responsible for the consumption of luxuries while forsaking necessities. Furthermore, advertising often leads to a switch from traditional time-tested products and services to costlier sophisticated alternatives. 

This briefing paper examines the role of advertising in promoting unsustainable consumption trends. While doing this, it analyses how the rich (and the middle class) are over-consuming by getting influenced through slick marketing and advertising strategies and how the poor are also getting affected.  In the end this paper suggests corrective measures, among which is the possible positive role that advertising can  play in promoting sustainable consumption.

What would have happened in a country like India if there were no advertisements? Would people buy less of high-priced luxuries? Would there be fewer swanky cars on the streets or lesser number of people using credit cards?  Surely there would be fewer of these. Not only that if advertising did not exist or was very much controlled there would not be ‘n’ number of soda drinks selling across the country delivering slightly different tastes (when one out of five Indians do not have access to safe water) nor innumerable electronic gadgets delivering more and more of needless features. 

The point is that advertising does often result in overspending and over-consumption by creating artificial needs. And often, if not always, such over-consumption is unsustainable in the long run. 

In a country like India and in many other developing nations the problem is somewhat more complex. In this country while a group of people over-consume, i.e. the haves, there is another group who cannot even consume, i.e. the have-nots.  While there is a need to regulate advertising so that this unsustainable consumption by the first group can be curtailed there is also a necessity to use appropriate public action to better the lot of the other group. 

Overconsumption and Underconsumption

Now who are these people who over-consume and who consume less? The answer is best provided by an NCAER (National Council of Applied Economic Research, New Delhi) study done in 1996. The study divided India’s consumption classes into the following groups: 
 

The NCAER study clearly puts things in perspective. There are 210mn destitute in this country whose Right to Basic Needs are always not fulfilled. Side by side there are about 156mn people who over-consume and 275mn more who are gradually moving towards potentially unsustainable consumption levels. 

Advertising  has an influence on the consumption habits of this group of  about 431mn people. Advertising also, to an extent, influences the ‘aspirants’ who number another 275mn. 

Trends in Consumption 

As already underlined, consumption in India presents a dual problem. On the one hand there is over-consumption which is unsustainable while on the other hand there is under-consumption which infringes the Right to Basic Needs. 

While speaking of underconsumption, the United Nations Development Programme’s (UNDP) Human Development Report 1998 (HDR 1998)  provides one of the most striking statistics. 

According to this report, the ratios of consumption levels of 20 percent of the people who live in the poorest countries to the 20 percent who live in the richest countries are: 

• Eleven times for meat,
• Seventeen times for energy,
• Seven times for fish,
• Forty-nine times for telephone lines,
• One hundred forty five times for cars, and 
• Sixteen times in the overall.

First  of  all  advertising, though not targeted  as  such,  does influence the very poor (the destitutes) to forsake some of their basic needs and buy/choose commodities not required immediately. In  villages  across India we can find TV sets  that  run  on generators  (as  there is no regular electricity supply)  but  no such  arrangement that village children may read or write in  the evenings.  Even  the very poor of the villages get  to  see  (and enjoy) the programmes and the advertisements on these TV sets and make slow changes in their consumption patterns. 

One  such noticeable shift is in the sale of shampoos when many traditional alternatives exist. The urban poor are more affected as they are more  open to the influence of unsustainable  lifestyles  through advertisements  and  also  because  of  the contiguity  to  more affluent lifestyles. Also satellite television is more common  in cities. Satellite TV channels being less regulated and having huge footprints cutting across rich and poor nations airs large number of advertisements of potentially  harmful products  and unsustainable lifestyles. 

All this together aggravates the problem of underconsumption  in developing  nations. While public policy should be designed in a way  that the destitute receive their entitlements and can rise above the depths of poverty and deprivation it should also  be extra vigilant so that this vulnerable group does not get  pushed back into  more unsustainable lifestyles (poverty in itself is unsustainable) by trying to emulate lifestyles portrayed in advertisements. While most governments have done something or the other to achieve the first objective very few have thought of the second. 

While  there is the issue of producer responsibility as to what should  be  produced and how and in what amounts there is  the related  responsibility of  advertisers and their clients. Advertising  should be responsible as consumers are not always best equipped to make decisions. Between  responsible advertising and rules to regulate it we  have to make a choice or attempt a compromise. 

The Bane of Over-consumption 

In India  the forces of globalisation are having  wide-ranging impacts on  consumption trends. Recent studies have  shown  that consumer  choice is shifting away from low value durables. Evidence also seems to suggest that consumption in rural areas is growing faster than in urban areas. 
 

Country	Total advertising  expenditure (US$bn)	Advertising as a  percentage of GDP	Education as a  percentage of GDP
Colombia	1.4	2.6	3.4
United Kingdom	16.6	1.4	5.5
New Zealand	1.0	1.4	6.4
Hong Kong, China	2.2	1.4	2.8
Korea, Rep. Of	6.7	1.4	3.7
Venezuela	1.0	1.4	5.0
USA	101.2	1.3	5.4
Taiwan, China	3.4	1.2	-
Brazil	8.2	1.2	-
Australia	4.7	1.2	5.4

Note: The table here shows what kind of money is spent to influence the consumption habits and what kind of money goes to education. The link here is that if more money could be  spent on education (especially consumer education) then there is a possibility of consumers switching to more sustainable consumption habits.

 The  latest  study by the NCAER titled Indian Market Demographics Report, 1998 has found a definite increase in the rural share of 
high-value items consumed. It has also found that between 1993-94 and  1995-96 the number of durable items owned by consuming households  has increased at an annual rate of 9.6 percent. At the top of this list of  durable  goods (which experienced  maximum growth  in purchases)  are washing  machines  (25.5%),  colour televisions (14.8%) and refrigerators (13.3%). 

The study also shows that the  increased  rural  market share for consumer durables is due to aspiration buying. 

Advertising Industry and Consumption

A survey conducted in December 1995 by an Indian social scientist Dr  Anuradha Samant showed that 66 percent of  those  interviewed made a special effort to view advertisements on television and 50 percent read them in print media.  Many more could immediately recall five ads they had seen on television and five in the print media. Fifty-five percent admitted to trying out new products advertised: 72 percent of those who had children under 15 said their children pressed them into buying things they had seen on TV; and 72 percent admitted to having changed brands being influenced by advertisements. 

In India the buy-now-pay-later syndrome is pushing more and more people into avoidable debt. Lured by advertisements and the buy-now-pay-later tags attached in most such schemes consumers are buying more and more commodities without assessing whether the loans can be paid back without difficulty. If such a situation continues then our future generations will become net dis-savers (see box).

 

The Credit Card Boom

Credit cards are being increasingly used by middle class Indians according to a report published in the media. The number of people possessing credit cards at the beginning of 1997 was 1.8mn and their number is increasing at a fast rate of 35 to 40 percent per annum. Other than slick and well produced advertisements the card market boom is also being attributed to peer pressure. Over 600 cities and small towns across the countries have enterprises and organisations which accept credit cards.

Again it is a fact that slick advertising is pushing out traditional and in some cases better alternatives from the consumers’ reach. Here ‘better’ may mean less damaging to the environment, using cheaper inputs, or being made of natural as opposed to artificial constituents. 

According to a McKinsey report on India’s consumption patterns, Indians have given up many of their traditional items used as soaps, shampoos or medicinal remedies. The national advertisement spends on toilet soaps on Indian television have increased from Rs 230mn in 1993 to Rs 370mn in 1995. In the case of tea, the TV ad spend was Rs 130mn in 1995 against just Rs 75mn in 1993. Ad spends on toothpaste have  doubled to Rs 220mn in 1995 from Rs 110mn in 1993. 

The past year had not been good for the business in India, therefore the advertising industry has also suffered. With a gross income of Rs 799.15 crore and Rs 5,330.09 crore (1 crore = 10 million) in capitalised billings, the advertising industry in India had grown by 17.9 percent in 1997-98. (see the following chart). 
 

However much is hidden behind the low rate of growth in 1997-98. First of all media planning has turned more scientific.  This means that the client’s extra money may have worked better for the clients of the advertising agencies than it would have in the early 1990s. So in spite of having a bad year the Indian advertising industry has been becoming stronger at the top. 

However this does not mean that consumption levels had come down with the slowdown of the advertising industry. To cite an example: colour TVs and refrigerator sales witnessed a 30 percent growth during this time. The high-end varieties of these gadgets also did very well. Studies have shown that Indian consumers are upgrading or buying more of higher-end items. Industry pundits are of the opinion that a new period of growth will begin in the advertising industry by the end of 1999. 

Recently the managing director of Baron International Limited (a large company which markets Akai televisions)  was quoted in the newspaper saying, ‘Adspend is the only way to infuse life into an otherwise depressed market.’ This is portentuos. A market can be resuscicated through increased advertising, as one of the strategies, but the resultant surge in consumption maybe artificial and could be unsustainable in the long run. 

Large players in the electronic consumer goods market like Akai, Videocon, BPL have recently hiked their advertising budgets by 35 to 50 percent to counter a sluggish market. The above mentioned Baron International has hiked their advertising and  marketing budgets for the current year by 50 percent. Similarly the advertising and sales promotion budgets of Samsung India Electronics have grown by 42 percent in 1997 over the previous year. 

In short it can be said that though the economy is in a recession the advertising industry is going all out to resuscicate the market. Moreover it should be remembered that in the last ten years the Indian advertising industry has grown more than 200 percent. 

What Can be Done?

It is obvious that the potential of the advertising industry is immense.  Globally, advertising is at present a $435bn business. If all forms of marketing are added then the figure leaps to $1tn. That advertising serves as the link between production and consumption cannot be debated. Therefore, if advertising becomes more responsible we will have made much headway in our movement towards sustainable consumption. 

Businesses have often come out with voluntary codes which though well meaning in intent often fail to deliver the goods. For example the Paris-based International Chamber of Commerce (ICC), the biggest membership body of business, has a 23-article code of advertising practices. The code aimed to promote high ethics by self-regulation. It also provides guidelines for advertisements addressed to children. However, like most of ICC’s solemn guidelines, it has no teeth and its members have no desire either, to follow them. What may be better is the option of co-regulation of voluntary codes where infringement results in government action against the offending party. Australia provides a good example of such co-regulation.  Again a multi-stakeholder  review mechanism can be instituted at the international level (within a body like the UN Commission on Sustainable Development) to review such voluntary codes (and their implementation across nations). 

 

Scope of the ICC Code of Advertising Practice (1997 Edition)

The Code applies to all advertisements for the promotion of any form of goods and services. It  should be read in conjunction with the other ICC Codes of Marketing Practice, namely: ICC International Code of Sales Promotion, ICC International Code of Practice on Direct Marketing, ICC Code on Environmental Advertising, ICC Code on Sponsorship, and ICC/ESOMAR International Code of Marketing and Social Research Practice.

 
 

The UNEP Meet on Advertising

In January 1999, the United Nations Environmental Programme (UNEP) conducted an experts’ meeting in Paris on Advertising and Sustainable Consumption. Some of the issues on which the experts were in agreement are listed below: Sustainable consumption is a part of a larger sustainable development agenda but is also important in its own right. Sustainable consumption goes beyond “green” consumption and addresses equity and social concerns as well; The advertising sector can make efforts to affect its clients, consumers and its own operations. Company reporting is one way they can communicate these efforts; As corporate reputation and brand image become increasingly important components of  corporate equity, advertising agencies will play an important role in advising their clients on how to integrate sustainability in their operations; Governments have the important responsibility of setting the regulatory framework conducive to change; and  In major cities in the world, in both developing and developed countries, consumers’ aspirations are remarkably similar and global consumption trends are set. They could provide a useful platform for exploring how to implement advertising initiatives for sustainable consumption.

The code sets standards for ethical conduct to be followed by all concerned with advertising, whether as marketers or advertisers, advertising practitioners or agencies, or media, and is to be applied against the background of the applicable law. 

In India broadcasters and liquor companies have come out with a self regulatory code (Karnik Code) for liquor advertisements after certain liquor ads drew the ire of the Information and Broadcasting Ministry.  This code among other things imposes strictures against surrogate advertisements, the timing of the slots for liquor ads and targeting of minors. 

In many countries there have been initiatives to use advertising to drive home the sustainability message. As an example we can cite the Dutch SIRE initiative which deals with environment, child abuse, violence, health and other issues. While consumer education to influence consumers into choosing sustainable lifestyles does work, other  options also exist. Some of these are outlined here: 

The Right to Counter-advertise

Often one comes across advertisements, which do not speak the truth, or hides facts. Even there are advertisements which can be called ‘advertisements on  advertising.’ These are campaigns, which say why  advertising is good for the consumer. It draws on an inverted logic which links advertising with the Right to Choice. Advertising, it says, helps the consumer to exercise the right to Choose. There is a need to counter such wrong/unethical advertising. Consumer groups should be empowered so that they can counter-advertise (see box for example).
 

Truth in Advertising Set Aside--A Proposal for the United States

In 1997 American companies spent more than $100 billion on television advertising, paying up to $8000 per second of airtime. The result is a heavy dominance of commercial information, all with one underlying message: “buy more stuff”.  Other ideas – on alternative lifestyles and environmental awareness- are not heard because their supporters do not have the financial backing to pay for airtime.   Consumer groups in the United States are proposing a solution to this imbalance: the truth in advertising assurance set-aside. Under the proposal companies would be required to set aside a small percentage--less than 3 percent--of their television advertising tax exemption for a special fund. This money would then be used to fund certified, qualified public interest television producers to prepare and air counter-advertising that broadens the messages and views in advertising.  Refunds could be given to companies whose advertisements are realistic and promote products that are healthy, non-polluting and energy-efficient. This would give an incentive to cut back on misleading advertisements.  A precedent for this scheme exists: in the state of California tobacco companies must contribute funds to anti-smoking campaigns. -Adapted from the UNDP Human Development Report, 1998

Labelling for Responsible Advertising

Labelling can be used to make producers more responsible towards sustainable production goals. A responsible advertiser label can give certain products a different kind of brand equity or image which may help to make such products sell. 

Flagging the Seriousness of The Issue

Observances like ‘Buy Nothing Day’,  ‘Watch no TV week’ etc can help to flag the issues related to advertising and unsustainable consumption, and increase consumer awareness. 

Regulating Advertising

In India liquor and cigarette advertisements are banned on the state run television channels. This is primarily because of the health  risks associated with these products. Also the ban on liquor advertisements have spawned surrogate advertisements which are nothing but liquor ads in disguise. There is a need for governments to decide what should be advertised and what shouldn’t. While health and safety aspects can be one important criterion for decision making, sustainable consumption levels should also be considered in deciding what kind of advertisements can be harmful. 

Research Agenda for Developing countries

In 1993, the UNDP had put out a report which showed that pernicious advertising is rampant in developed countries which will have a deleterious effect on people. People seem to have forgotten this report. While the developed nations have already done many studies on the impact of advertising on sustainable consumption and other related issues very little has been done in developing nations. Governments and civil society groups from developing nations should seriously study the nexus between advertising and consumption so that focussed policy directions reflecting local situations can be taken. 

 

Recommendations Consumers should have the right to counter-advertise. There should be mechanisms to empower (through financial and legal instruments) the consumer movement so that consumer groups can take up the cause of the consumer vis-a-vis irresponsible/unethical advertising. A company-specific responsible advertiser label can be designed taking all advertising/marketing  practices of the company into consideration. Observances like ‘Buy Nothing Day’, ‘Watch no TV week’ can help in strengthening the movement against irresponsible advertising that leads to unsustainable consumption. Appropriate measures for regulating advertising of luxuries which  take into consideration the average levels of affluence of a country. Review mechanisms at international and national level with transparent reporting to explore the efficacy and use of voluntary codes on advertising. More research (especially in developing countries) on the relationship between advertising and unsustainable consumption. Economic instruments (which could include incentives) to promote responsible advertising and also advertising that directly promote sustainable consumption.